Crossings into Gaza will not fully open until the release of an Israeli soldier captured by Hamas nearly three years ago, Israel's prime minister, Ehud Olmert, yesterday told George Mitchell, who was in Jerusalem on his first visit as President Barack Obama's envoy to the Middle East.

After the lunch meeting, Mitchell said that "consolidating" the ceasefire which halted Israel's three-week war was of "critical importance," along with a halt to smuggling and reopening of the crossings.

Israel insists that its economic blockade of Gaza, now more than a year and a half old, cannot be lifted without the release of Gilad Shalit, who was captured near the Gaza border in June 2006 by militants from groups including Hamas.

Israeli officials said Olmert also told Mitchell that full reopening of the crossings would be under a 2005 agreement, which would need the presence of the Fatah-dominated Presidential Guard. Hamas has yet to accept a return of Fatah forces to Gaza, except a few at the Rafah crossing with Egypt.

Aid agencies want an end to the blockade to relieve the deepening economic crisis in Gaza and, after the war, to allow rebuilding. All exports from Gaza are banned and all imports forbidden, except for a limited list of humanitarian goods.

"The limited access has a real impact on our ability to bring relief to thousands of Gazans, as only a fraction of what is needed to rebuild the area is allowed in," said John Prideaux-Brune of Oxfam International. "We won't rebuild the lives of Gaza's residents without the cement needed to rebuild schools or the pipes to fix the water or sewage system. Thousands of necessary goods and materials needed to get the recovery process up and running are now being blocked from entering Gaza. This must be reversed urgently."

Mitchell was due to travel to the West Bank today to meet the Palestinian president, Mahmoud Abbas, but has no plan to meet Hamas leaders. He has held talks with Egypt's president Hosni Mubarak in Cairo.

"President Obama has said that the US is committed to Israel's security and to its right to defend itself against legitimate threats," Mitchell said yesterday. "The US will sustain an active commitment for reaching the goal of two states living side by side in peace and security."

Overnight on Tuesday, Israeli jets bombed smuggling tunnels on Gaza's border with Egypt; hours later smugglers were operating or repairing the tunnels.

The strikes came after an Israeli soldier was killed on Tuesday near the Gaza border. Israeli troops then killed two Palestinians, one a farmer, the other a militant.

Aside from Gaza, Mitchell comes to the Middle East when peace talks between Israel and Palestinians have stalled. In a sign of the challenges ahead, the Israeli Peace Now group released a report yesterday showing that Jewish settlements in the West Bank grew more in 2008 than in the previous year. It said 1,257 structures were built in settlements last year, up 57% on 2007.

Settlements on occupied territory are illegal under international law and the US "road map", which remains the basis for the peace process, Israel is committed to freezing all settlement construction, while the Palestinians in turn are to curb violence. The French foreign ministry summoned Israel's ambassador yesterday to protest at an "unacceptable incident" after Israeli troops fired two warning shots at a French diplomatic convoy as it tried to leave Gaza. The convoy was delayed for six hours.